Archives for May 2017

Solving Tennessee’s Broadband Digital Divide

Levoy Knowles, TTA Executive Director

Part of what makes Tennessee a truly great state is its diversity. On one end of the state, we have some of the highest mountains in the Eastern U.S., and on the other side, we have the rich Mississippi Delta. We have thriving big cities and wonderful small towns. We have the Home of the Blues and the Mother Church of Country Music.

But while the geographic and cultural differences between regions of our state make us strong, the “digital divide” present in some areas of Tennessee is a major weakness for communities on the wrong side of that divide.

Some Tennesseans enjoy world-class broadband service, while residents in other pockets are completely unserved by a broadband provider.

At TTA, our goal is for every Tennessean to have access to a powerful, life-changing broadband connection. That’s why we’ve decided that the theme for this year’s TTA’s annual meeting and convention will be “Solving Tennessee’s Broadband Digital Divide.”

As always, I’m excited to see old friends, learn about the latest technology and strategies shaping our industry, and better get to know the new faces who have joined us. But I think this year, in the wake of the legislature passing the governor’s Broadband Accessibility Act, the sessions and networking time will center around bridging that digital divide. We are blessed to have many of brightest minds in telecom all under one roof at the conference. I’m certainly looking forward to hearing the ideas and seeing what progress we can make toward leveling the online playing field across our great state. I hope you’ll join us. View the full conference agenda.

TTA members should begin seeing a lower tax bill next year thanks to the passage of a property tax bill from the state legislature.

The mechanics of the legislation are complicated, but the net effect should lead to a total tax savings of about $2 million annually for the TTA membership.

“We hear so much about the slow pace of change in government, but I am very proud to see that our representatives in Nashville moved quickly and decisively to even out the tax rate for broadband providers in Tennessee,” said TTA Executive Director Levoy Knowles.

The new legislation is a result of TTA and its members making lawmakers aware of the disparity in ad valorem tax rates between telcos and their competitors. For years, cable companies or other providers designated as “commercial” companies paid ad valorem taxes at 40 percent of the assessed value of their real property and 30 percent of their personal property. Telcos, which were still classified as utilities, paid taxes at 55 percent in both categories. The difference amounts to approximately $15 million in taxes annually for Tennessee telcos, some of which was offset by redirecting long-distance sales tax.

At the urging of TTA and its members, Rep. Charles Sargent, R-Franklin, introduced House Bill 1367 this session, with the intent of dropping the rates for telcos and Tier 2 companies like iRis Networks down to the commercial rates. Sen. Paul Bailey, R-Sparta, introduced a similar bill in the Senate and was instrumental in the passage on that side of the legislature. It was passed by the House on May 9 and then the Senate on May 10.

“This is great news that puts money in the pockets of TTA members that they can now invest in improving the networks that serve thousands of Tennesseans,” Knowles said. “For years now, TTA members have been paying a significantly higher tax rate than our competitors. Now that the playing field is level, I’ll be pleased to see what TTA members can accomplish with this extra capital.”

The legislation — which applies to cooperatives, regulated companies and their subsidiaries — passed 88-0 in the House and 32-0 in the Senate.

While the new rules take effect on Jan. 1, 2018, the legislation includes additional requirements to offset the full amount of the savings in the first four years. To ease the drop in tax revenue on the state and local governments collecting it, telcos agreed to pay two separate “privilege taxes” of $4 million in 2018, $3 million in 2019, $2 million in 2020 and $1 million in 2021 before phasing out the tax. The second privilege tax is $750,000 annually for the first three years and then $500,000 annually for the next two.

Even with the privilege tax — of which large providers will pay the majority — the new legislation should mean several hundred of thousands of dollars in savings for TTA members as a whole starting with their 2018 taxes.

Loretto Telecom has a long history of serving its customers — and a legacy of women leading the way. That history began when Ralph and Louise Passarella bought the company in 1946.

Ralph Passarella was being discharged from the U.S. Coast Guard after serving during World War II, and Louise had experience as a switchboard operator. Passarella was still in Brooklyn, New York, doing his final discharge from the naval yard when the Loretto exchange came up for sale. “He told her to go ahead and buy it, even before he returned,” says Desda Passarella Hutchins, CEO of Loretto Telecom and the founders’ daughter.

Disaster struck just five months later when an ice storm destroyed the entire system. “Subscribers pitched in to help rebuild so that service could be restored quicker,” Ms. Hutchins says. The company grew, adding exchanges in St. Joseph, Ethridge and Leoma, becoming the first telephone company in the state to offer touch-tone telephone and long-distance dialing.

Raph died in 1968 and Louise became president — in a time when it was unusual for a woman to work in that role. Five years later she remarried, and her new name, Louise Brown, became known all over the state of Tennessee and beyond. Through the years Ms. Brown served as TTA president and served many years on its Board of Directors. In 1990, she was selected as one of the outstanding telecommunications executives in America by Telephony Magazine. She co-authored “Telephones for Tennessee,” a history of telephony in the state.

Ms. Brown has nurtured and cherished the ideals for a better tomorrow. “In order to accomplish this, I believed in first preserving the rich historical treasures of the area, seeing the past as an inspiration to the future,” she said in a recent company newsletter. “Persistent and goal-driven, I have always seen people as individuals, as ‘seeds for the future.’ I have a vision, formed not by cold, hard, calculating facts, but rather by the hope inside of me. My hope is that my legacy will continue, always striving to affect countless tomorrows, touching future lives.”

Building for the future

Desda Passarella Hutchins was recently named president and chief executive officer, following in the footsteps of her mother. Ms. Brown continues to serve as chairman of the board. “My mother has always been a beacon for me, as well as for so many other people,” Ms. Hutchins says. “She’s the epitome of dedication and commitment. She lives to always challenge her family, her employees and all of her associates to ‘create the future.’”

Ms. Hutchins says everyone in the organization is aware of its history and that it drives them to excellence for the future. “There’s just so much history here with all the struggles to bring phone service to our areas,” Ms. Hutchins says. “That’s why it is ingrained in all of us. We’ve never known anything else, and we’re proud to carry on that tradition of service.”

Ms. Hutchins is no stranger to the telecommunications business, having started with the family-owned company as a little girl, recording daily collections into the payment register. After receiving a BBA from Memphis State University, as well as an MBA from the University of North Alabama, Ms Hutchins returned in 1984 as chief financial officer. “I strive to always face my responsibilities to our employees, whose merits we recognize on a daily basis,” Hutchins says.

She says she is committed to the community, like her mother, who served for over 75 years.

Technology plays a big role in the future of Loretto Telecom. Ms. Hutchins says the phrase “fast and furious” comes to mind as the company works to improve services in the ever-changing world of technology. “Our main thrust of energy is focused toward the latest and highly technological products,” Hutchins says. “We’re striving to beef up DSL access for our customers.”

More than 60 percent of Loretto Telecom customers have access to a 10/1 DSL connection, and the company plans to continue to expand the number of customers who have access to faster broadband.

Loretto’s service area encompasses about 400 square miles in Lawrence County, including the Ethridge exchange to the north, and Leoma, Loretto, Five Points, and St. Joseph exchanges to the south. In addition to voice and broadband, Loretto offers F-Secure Internet Security and Med-Alert medical monitoring services. The company has also put an emphasis on streaming TV options for customers.

Ms. Hutchins says it comes down to the company’s long tradition of adapting to meet customer demands. “Customers want faster and faster speeds,” Ms. Hutchins says. “We want to do everything we can to focus on the improvements our customers want, always continuing with Ms. Louise’s long legacy and dreams!”

Both parties emphasize broadband

President Trump has called for significant infrastructure spending. While specifics remain unclear, he has discussed broad goals such as improved access to broadband as well as improvements to roads, bridges and airports.

Democrats have countered with a plan that also emphasizes broadband networks along with improved roads, bridges, schools and veterans hospitals.

So even at a time of political divide, leaders of both parties recognize the importance of broadband.

“Small, hometown broadband providers have led and are continuing to lead the way in deploying high-speed, sustainable broadband that responds to the needs of consumers and businesses in rural America,” she says. “To not have access to high-speed internet today should be unimaginable, yet millions of rural Americans have limited or even no access to robust broadband. And while it is critical to deliver broadband to the unserved, it is just as critical that those already receiving broadband remain served.”

While infrastructure improvements have some bipartisan support, a stopgap spending bill to fund the government through the fall did not include the sweeping improvements touted during last year’s election.

The inability to communicate is what prompted small businesses and cooperatives in rural America to organize years ago as pioneers who brought the telephone to rural America.

“With this infrastructure came new opportunities for business development and economic prosperity — outcomes possible only because of the reliable, sustainable communications at their fingertips,” Bloomfield says. “Today, rural America continues to be fertile ground for innovation, but broadband has replaced the telephone and equaled roads and bridges and airports as the infrastructure opportunity of the 21st century. As the broadband era commenced, broadband providers have leapt to the call once again, leading the way in building advanced networks that support cutting-edge technologies and the internet’s fastest speeds across large portions of rural America.”

Customer retention is vital, and one service offers distinct challenges — video.

The cost is low for a video customer to switch to a new provider, the competition offers compelling teaser rates, and promotions such as free video weekends are popular but insufficient for consistent lock-in.

“The profit margin is so slim; we haven’t found anything to entice those customers to not switch,” says LaCosta Fields, sales and service coordinator at Scott County Telephone Cooperative in Gate City, Virginia.

She says customer service representatives have authority to make special offers to try to keep a customer from considering a switch. “But by the time they call our CSRs, they have already changed providers,” she says. “We haven’t found anything to get ahead of the disconnects.”

It’s a common problem in the industry, and companies search for creative ways to keep customers interested and loyal to video services.

Occasionally offering free movie weekends, such as HBO or Cinemax, is one strategy to build customer loyalty, says Shannon Hamilton, customer service manager at Ben Lomand Connect in McMinnville.

When a customer tries to terminate service, there are bundles designed to keep them and that offer upgrades such as free movie channels for one month, Hamilton says. But if a customer comes in ready to return their equipment, it is usually too late, she adds.

Similarly, Fields says that when they can reach the customer before they switch to a new provider, they use offers of free premium channels for 30 to 60 days and free HD or DVR services.

When video and telephone customers explore dropping services, internet access can keep them loyal. ”When our co-op members call in to disconnect their dial tone, they change their minds when they find out they cannot keep internet only,” Hamilton says.

Customers also like the promotions such as free movie weekend, but a customer may jump ship once the offer expires, Fields says. The competition, however, also faces similar challenges.

“We have the video provider jumpers — once the promo with Dish or Direct expires and they have to start paying the current price of their package, they come back,” she says. “We watch those customers closely to make sure they do not abuse the offers, and we are not likely to offer anything to the customers who are repeat non-pays again. We charge them to come back out and rewire.”

For DTC Communications in Alexandria, Tennessee, customer retention plans are receiving a greater emphasis. “We have a lot of competition in our service areas but our local channel, DTC3, sets us apart from the competition,” says DTC Sales and Marketing Manager Jannie Mulaski. “We are researching additional options to increase customer retention. They are going to become very important in the future.”